Asian Shares: Nikkei Touches Lowest Level in Over a Year -- Update

By Kosaku Narioka and Chao Deng 

Japanese stocks plummeted Friday morning, sinking to their lowest level in more than a year as sharp declines overseas fueled investor anxiety.

The benchmark Nikkei Stock Average was down 3.9% at 15117.70, after a holiday on Thursday when most Asian shares were tumbled, contributing to the global slump. Japan shares, down 10% for the week so far, are on track for their worst weekly percentage performance in nearly five years. The Nikkei's year-to-date decline of 21% is almost as steep as the losses in China's mainland stock market, the epicenter of the global stock-selloff at the start of the year.

On Friday, the Hang Seng Index quickly followed the region's declines at the open, last trading down 0.7% at 18467.91, its lowest since mid-2012. Australia's S&P/ASX 200 was down 0.9%, as was South Korea's Kospi.

"The leads for Asia have once again centered on European banks and shenanigans in the oil complex," Chris Weston, chief market strategist at brokerage IG in Melbourne, said.

The Federal Reserve's cautious stance on further rate increases has raised doubts about the global economy and led to the Japanese yen's sharp rise against the dollar, which has pummeled expectations for the competitiveness of Japanese exporters and hurt Japanese stocks. The dollar was last at 112.38 yen after falling to Yen110.99 on Thursday, the lowest level since Oct. 31, 2014, when the Bank of Japan shocked markets by boosting its current bond-buying scheme.

Japanese Finance Minister Taro Aso said Friday morning the yen's moves have been rough and that rapid moves in the foreign-exchange market aren't desirable. He said he would watch foreign-exchange markets with close interest.

The yen and government bonds tend to appreciate in times of economic uncertainty. The benchmark 10-year Japanese government-bond yield was flat at 0.005%.

Early weakness in Asia was tempered by some signs of stability in U.S. stocks on Thursday, as they pared steep losses in late-afternoon trading, as well as a surge in crude-oil prices, which clawed back from a fresh multiyear low in after-hours trading.

Sweden's central bank on Thursday cut its main interest rate further into negative territory, a move judged more aggressive than anticipated by markets.

Oil inflamed the wide equities selloff as crude prices settled at their lowest levels since 2003 amid worries about growing stockpiles in the U.S. and about financial markets. But oil staged a recovery after U.S. prices settled down 4.5% at US$26.21 a barrel overnight. Brent crude oil was last up 5.6% at $31.75 early in Asia.

While there are worries that the world is headed for a systemic banking crisis, the performance of financial stocks Friday morning in Asia suggests skittishness was contained. On the Nikkei, financials were down 2.5%, less than the broader market's decline. In Australia, financial stocks fared a tad worse than the overall market, down by 1%. The S&P ASX 200 entered a technical bear-market earlier this week, marked by a 20% fall from its high last year, but recovered 1% on Thursday as major banks rebounded.

On Friday, materials and technology shares pulled down the Japanese market, with each sector off about 4.5%. Fuji Heavy Industries Ltd. plunged 6.6%, while Kawasaki Heavy Industries was down 6.4%. Internet software firm Trend Micro Inc. sank 8.6%, the worst performer on the Nikkei.

"Gone are the days where bad news was good as it portended of more dovish central banks and more cheap money on offer," Australia & New Zealand Banking Group said in a report to clients.

It said some of the anxiety was likely chalked up to delayed disappointment in a testimony by Federal Reserve Chairwoman Janet Yellen as she juggled recognizing strength in the domestic economy and potential risks of heightened financial market volatility. On Thursday, she said the U.S. central bank was studying the feasibility of pushing short-term interest rates into negative territory should it need to give the economy an added boost.

On Thursday, the Dow Jones Industrial Average declined 255 points, or 1.6%, to 15660. The S&P 500 fell 1.2% and the Nasdaq Composite lost 0.4%. The Stoxx Europe 600 fell 3.7% to its lowest close since 2013, and the U.K.'s FTSE 100 closed at its lowest level since July 2012.

Investors sought safety, with U.S. government bonds, the yen and gold surging. Gold futures jumped to settle at the highest level in about a year at $1,247.80 a troy ounce overnight, but was last down 0.7% at $1,239 early in Asia.

Robb M. Stewart contributed to this article.

Write to Kosaku Narioka at [e-mail] and Chao Deng at [e-mail]

(END) Dow Jones Newswires

February 11, 2016 21:29 ET (02:29 GMT)

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